Economics – FX Math (Cross‑Rates & Quoti — Flashcards

Question

What is a cross-rate in FX?

Tap to flip

Answer

An exchange rate between two currencies derived from a third currency.

Tap to flip back

Question

In cross-rates with bid-ask spreads, why can't you just use midquotes mechanically for a tradable dealer price?

Tap to flip

Answer

Because the dealer keeps the spread; direction determines bid versus ask.

Tap to flip back

Question

Practice prompt: You are given $S (A / B)$ and $S (C / B)$ . How would you get $S (A / C)$ qualitatively?

Tap to flip

Answer

Divide, because the common denominator currency cancels.

Tap to flip back

Question

Practice prompt: You are given $S (A / B)$ and $S (B / C)$ . How would you get $S (A / C)$ qualitatively?

Tap to flip

Answer

Multiply, because $B$ cancels.

Tap to flip back

Question

What is a cross-rate in FX?

Tap to flip

Answer

An exchange rate between two currencies derived from a third currency.

Tap to flip back

Question

In cross-rates with bid-ask spreads, why can't you just use midquotes mechanically for a tradable dealer price?

Tap to flip

Answer

Because the dealer keeps the spread; direction determines bid versus ask.

Tap to flip back

Question

Practice prompt: You are given $S (A / B)$ and $S (C / B)$ . How would you get $S (A / C)$ qualitatively?

Tap to flip

Answer

Divide, because the common denominator currency cancels.

Tap to flip back

Question

Practice prompt: You are given $S (A / B)$ and $S (B / C)$ . How would you get $S (A / C)$ qualitatively?

Tap to flip

Answer

Multiply, because $B$ cancels.

Tap to flip back